MARKET REPORT : Stocks tumble after bailout passes
Posted on Saturday, October 4, 2008
NEW YORK — Wall Street ended an intensely volatile week with another sell-off Friday, and credit markets remained strained after enthusiasm over the government’s $ 700 billion financial rescue plan gave way to worries about obstacles still facing the economy.
The Dow Jones industrial average fell 157. 47, or 1. 50 percent, to 10, 325. 38 after rising more than 310 points. All the major indexes finished the week with big losses.
Investors dumped stocks late in the session after a big intraday rally, repeating a defensive move seen throughout the year-long market pullback. As lawmakers voted on the plan, which President Bush quickly signed into law, the Dow advanced more than 300 points. After it passed, the blue chips moved in and out of positive territory before ending down more than 150 points.
Investors had been anxious for resolution on the government’s plan to buy up bad assets from banks and other institutions to shore up the financial industry and help resuscitate credit markets. Trading across markets was turbulent throughout the week as investors tried to determine whether the plan would win approval and what effect it might have. On Monday, the House’s rejection took Wall Street and Capitol Hill by surprise and handed stocks their biggest losses in years.
The Senate subsequently passed a sweetened version of the plan that added tax breaks and raised the limit on federal deposit insurance from $ 100, 000 to $ 250, 000.
But Wall Street has come to realize passage of the plan is not a quick fix.
“We’re three weeks into a severe credit crunch, and it’s causing untold economic damage to the country,” said Hank Smith, chief investment officer at Haverford Investments. He said that while the bill’s passage will help Wall Street, the broader effects of the paralysis in the credit markets has yet to emerge.
“It’s fairly reasonable to assume that this should help unfreeze the credit markets, but what we don’t know: What’s happened so far ? How much of a dent has it put into the economy ?”
Broader stock indicators also ended lower Friday. The Standard & Poor’s 500 index fell 15. 05, or 1. 35 percent, to 1, 099. 23, and the Nasdaq composite index fell 29. 33, or 1. 48 percent, to 1, 947. 39.
The Russell 2000 index of smaller companies fell 18. 27, or 2. 87 percent, to 619. 40.
Declining issues outnumbered advancers by a ratio of about 2-to-1 on the New York Stock Exchange, where volume came to 6. 52 billion shares.
The dollar was mostly higher against other major currencies, while gold prices fell.
Light, sweet crude fell 9 cents to settle at $ 93. 88 on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average fell 1. 94 percent. Britain’s FTSE 100 rose 2. 26 percent, Germany’s DAX index rose 2. 41 percent, and France’s CAC-40 rose 2. 96 percent.
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